5.On May 1, Soriano Co. reported the following account balances along with their estimated fair values: Receivables........................ Inventory........................... Copyrights ......................... Carrying Amount $ 90,000 75,000 125,000 825,000 $1,115,000 $ 160,000 645,000 100,000
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
5.On May 1, Soriano Co. reported the following account balances along with their estimated fair values:
Receivables........................ Inventory........................... Copyrights .........................
Carrying Amount
$ 90,000 75,000 125,000 825,000 $1,115,000
$ 160,000 645,000 100,000 210,000 $1,115,000
Fair Value
$ 90,000 75,000 480,000 700,000 $1,345,000
$ 160,000 635,000
Patented technology
Total assets . . . . . . . .
................
................
Current liabilities . . . .
Long-term liabilities. .
Common stock . . . . .
Total liabilities and equities. . . . . . . . . . .
................ ................ ................ ................
LO 2-4, 2-5, 2-6b, 2-7
On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate the merger, Zambrano also paid $100,000 to an investment banking firm.
The following information was also available:
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∙ Zambrano further agreed to pay an extra $70,000 to the former owners of Soriano only if they meet certain revenue goals during the next two years. Zambrano estimated the present value of its probability adjusted expected payment for this contingency at $35,000.
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∙ Soriano has a research and development project in process with an appraised value of $200,000. However, the project has not yet reached technological feasibility and the project’s assets have no alternative future use.
Prepare Zambrano’s
journal entries to record the Soriano acquisition assuming its initial cash pay- ment to the former owners wasa. $700,000.
b. $800,000.
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